SINGAPORE (July 15): Boustead Singapore last week released its FY20 results which were in line with expectations. With that, CGS-CIMB Research continues to rate Boustead “add” with an unchanged target price of $1.00.
The company’s growth was led by strong performance in both geospatial technology and energy-related engineering segments. This was partially offset by weaker property division, through 53%-owned Boustead Projects.
The research house also has an “add” call on Boustead Projects but with a lower target price of 88 cents from 93.1 cents previously.
See: Boustead Projects to unlock significant value despite slow recovery ahead
And unlike Boustead Projects, Boustead Singapore has managed to keep its FY20 dividend per share at 3 cents.
The reason for the company’s strong performance in its geospatial technology segment was primarily due to a steadfast demand across Australia and Southeast Asia, which resulted in revenue and pretax profit grow 12% and 9% y-o-y, respectively, in FY20.
In a Tuesday report, analysts Ong Khang Chuen and Caleb Pang say, “Underpinned by government agencies’ increasing use of smart mapping technologies to combat the recent major crises, including Australia’s massive bushfires and global spread of Covid-19 (contact tracing, planning of emergency routes, etc.), we continue to expect a 7.5% pretax profit growth for the segment to $31.9 million in FY21.”
As for the company’s energy-related engineering segment, pretax profit for FY20 surged six times y-o-y, despite the downturn in global crude oil prices. This is as Boustead executed on its strong order backlog.
“We see strong earnings visibility till end-1H22, as orderbook remained high at $279 million as of end-FY20 (end-FY19: $103 million), mainly made up of downstream oil & gas businesses (waste heat recovery units for LNG projects). We forecast energy-related engineering segment to record a pretax profit growth of 61% y-o-y to $12.7 million in FY21,” says Ong and Pang.
On the other hand, weaker project margins caused the company’s property segment to see a 23% y-o-y fall in pretax profit. Although this segment’s orderbook remains healthy, the analysts have forecasted pretax profit to further fall by 56% y-o-y in FY21 due to a staggered return to normalcy for construction activities post circuit breaker.
“With lower profit assumptions from property segment, we lower our FY21-22 EPS by 22-24%,” says the analysts.
As at 12.20pm, shares in Boustead Singapore are trading at 71 cents or about 1.0 times FY21 book with a dividend yield of 4.2%.
